Companies Relocating Their Ceos With Style

Many Corporations Are Paying Out Big Bucks To Get The Chief Executive They Want.

April 13, 1997|By Wall Street Journal

Moving to take a new job is a costly nightmare for most people. But for CEOs . . . well, they're not like most people.

Hefty payouts under the heading ''relocation expenses'' are popping up all over as companies release 1997 proxy statements outlining payments to newly appointed chief executives.

Consider the red-carpet treatment afforded PepsiCo Inc. Chief Executive Roger Enrico. He was reimbursed for a total of $777,311 last year to cover costs and related taxes for his move to PepsiCo's Purchase, N.Y., headquarters from Dallas, where he was vice chairman and chief of the company's restaurant business. And that is on top of $2.2 million in salary and bonus and options on 1.7 million shares.

But Enrico's package pales compared with the $1.1 million Bankers Trust New York Corp. paid to move CEO Frank Newman to New York from Washington, D.C.

How about Times Mirror Co. CEO Mark Willes? He got 25,000 shares in February 1996, then worth $871,875, for ''a housing differential allowance'' to cover the difference in housing costs between Los Angeles and Minneapolis, where he was a top executive with General Mills Inc. He also received $213,738 in 1995 for relocation assistance and an additional $97,003 in 1996.

Compensation experts say it is no longer extraordinary for a new CEO's moving costs and temporary housing to exceed $500,000. ''When you really want to recruit a great CEO, you're willing to gobble up this kind of expense,'' concurs Dennis Carey, vice chairman of recruiters Spencer-Stuart in Philadelphia.

Moreover, rich relocation packages are seen as a way to pump up CEO pay without ballooning the highly visible salary and bonus lines in a proxy statement. ''It's done for optical reasons,'' says Robin Ferracone, president of SCA Consulting, a Los Angeles compensation consultancy. It also sometimes is done to prevent other executives from perceiving the new recruit's pay and bonus package as outsized compared with their own, she adds.

The practice disturbs some investor activists. Expensive CEO relocation packages ''appear to be unreasonable expenditures. And they come out of the bottom line, which affects shareholders,'' says Robert Goch, corporate-governance director for the Investors' Rights Association of America. The activist group, based in Great Neck, N.Y., represents individual shareholders.

Ordinary mortals, of course, don't merit such royal moves. The typical transferee is a married 38-year-old man earning a salary of $53,159, reports the Employee Relocation Council. In 1995, U.S. businesses spent an average of $45,373 to move a current, home-owning staffer and $12,962 to relocate an existing employee living in rented housing, according to the Washington trade group.

Average outlays were much less for new hires: $35,382 for homeowners and $9,280 for renters. Fresh-faced college graduates often get even less: Typically $1,500 or $2,000 so they can ship belongings themselves, a brief orientation trip, two months' rent (to break their lease), temporary housing for 15 to 30 days and a redecoration allowance equal to two weeks' salary, says Thomas Peiffer, a Portsmouth, N.H., senior consultant for relocation consultants Runzheimer International.

But for CEOs, Peiffer says, such limitations don't apply. He has seen businesses cover the costs of selling CEOs' first, second and third homes - as well as move their 50-foot boats, antique automobiles, statues, pricey paintings and pet horses. Many top-level transferees dwell in temporary quarters for six to eight months; the company usually foots the bill for their lodging, most meals and flights home at least twice a month.

Troubled businesses rescued by a new chief executive contend that a cushy relocation deal is money well spent. That is the attitude at Charming Shoppes Inc., a specialty clothing retailer with 1,129 stores in 43 states, where the board of directors was contemplating a possible Chapter 11 bankruptcy filing before Sears, Roebuck and Co. executive Dorrit J. Bern agreed to take over as president and CEO in August 1995.

To woo Bern, the Bensalem, Pa., company offered her a $1 million salary, a $1 million signing bonus and a guaranteed bonus of at least $300,000 in the latest fiscal year, which ended Feb. 1. Still, she hesitated to uproot her husband and three school-age children, who live in Chicago. So, until her contract expires in August 2000, Charming Shoppes agreed to pay for a downtown Philadelphia apartment, where Bern stays during the week, and for flights home every Friday afternoon.